EDF Says 2008 Profit Was Hurt by Tartam Provision

By Tara Patel

Jan. 21 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of nuclear reactors, said its 2008 net income was hurt by the cost of a regulated power-rate system known as Tartam that was extended by French lawmakers last year.

The Paris-based utility, Europe’s largest power producer, said in a document on its Web site, that excluding non-recurring items, its profit for the year didn’t exceed that of 2007.

“The outlook is in line with our pessimistic outlook for the sector,” said Peter Wirtz, an analyst at WestLB in Dusseldorf. “There are additional risks that EDF’s tariffs won’t be raised this year.”

EDF tumbled as much as 4.3 percent and fell 1.50 euros, or 3.9 percent, to 36.92 euros at 12:02 p.m. in Paris, giving it a market value of 68.3 billion euros. The Tartam tariff system allowed businesses that opted for free-market power rates until the end of June 2007 to come back to lower state-regulated prices for two years.

The impact of the Tartam, which the French parliament voted to extend to mid-2010, was estimated at around 1 billion euros ($1.3 billion), the company said. This figure will be revised “on the basis of more recent assumptions” when full-year earnings are reported Feb. 12, the document stated.

The document was released by the company as part of a plan to study a possible private placement of long-term debt to institutional investors in the U.S. to help fund some of its acquisitions, EDF said in an e-mailed statement today.

Raising Funds

EDF is raising funds to pay for acquisitions including the 12.5 billion-pound ($17.7 billion) purchase of U.K. nuclear utility British Energy and the planned buying of nuclear assets of Constellation Energy Group Inc. for $4.5 billion. The French utility will also invest in its domestic fleet of 58 nuclear reactors to prolong their lives and fix technical problems that have crimped output, it said.

Earnings before interest, taxes, depreciation and amortization in 2008 “is expected to increase approximately 3 percent,” the utility reiterated. Estimates for ebidta and net income excluding non-recurring items don’t take into account the extension of the Tartam, the document said.

French lawmakers last July extended for one year the state- regulated rates for business to June 30, 2010. The system is aimed at shielding companies from rising energy costs.

EDF made provisions of 470 million euros for the system in 2006 and 248 million euros in 2007, according to its annual report.

Internal Growth

In 2009, EDF “will focus on organic growth and the strengthening of its business operations,” the document said. The utility plans to improve its operations “specifically the performance of its French nuclear fleet.”

The availability rate of the utility’s reactors last year “should be close” to the 80.2 percent achieved in 2007 compared with 83.6 percent in 2006. The utility is aiming to raise the rate to 85 percent by 2011, the document said.

A “clogging phenomenon” at some units and generator “anomalies” have affected performance, EDF said.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net